HomeMy WebLinkAbout1996-12-10; City Council; Resolution 96-4201
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RESOLUTION NO. 9 6 - 4 2 0
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROPRIATING $1 5,000 FROM THE RETAINED EARNINGS IN THE SOLID WASTE ENTERPRISE FUND MISCELLANEOUS PROFESSIONAL SERVICES ACCOUNT AND
AUTHORIZING EXECUTION OF A CONSULTANT SERVICES AGREEMENT WITH HILTON FARNKOPF & HOBSON
WHEREAS, the City Council has determined it is in the City’s best interest to
with a financial review proposed by Hilton Farnkopf & Hobson of its authorized soli
handler, Coast Waste Management; and
WHEREAS, adequate funds are not appropriated in the Solid Waste Enterprir
budget to conduct the proposed financial review; and
WHEREAS, adequate funds are available in the retained earnings of the Soh
Enterprise Fund;
NOW, THEREFORE, BE IT RESOLVED, BY THE City Council of the City of (
as follows:
1. The above recitations are true and correct.
2. The Professional Services Agreement between the City of Carlsbad anc
Farnkopf & Hobson attached hereto is hereby approved.
3. The City Manager is hereby authorized to execute said Agreement on beha
City.
4. The Finance Director is hereby authorized to appropriate $75,000 from the
earnings in the Solid Waste Enterprise Fund Miscellaneous Professional <
account.
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PASSED, APPROVED AND ADOPTED by the City Council of the City of Carlst:
regular meeting held on the 10th day of December , 1996, by the following vote,
AYES: Council Members Lewis, Nygaard, Kulchin, Hall and Finnila
NOES: None
ABSENT: None
v- - -- V
ATTEST:
a.f%&P#-
ALETHA L. RAUTENKRANZ, City Clerk/
(SEAL)
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AGREEMENT
THIS AGREEMENT, made and entered into as of the day of
1996, by and between the CITY OF CARLSBAD, a municipal corporation, hereinafter referred to
as "City", and HILTON FARNKOPF 8 HOBSOW hereinafter referred to as "Contractor."
RECITALS
City requires the services of a qualified contractor to review the 1995-96 audited financial
records of the City's authorized solid waste services handler, Coast Waste Management, Inc.;
and Contractor possesses the necessary skills and qualifications to provide the services required
by City;
NOW, THEREFORE, in consideration of these recitals and the mutual covenants
contained herein, City and Contractor agree as follows:
I. CONTRACTOR'S OBLIGATIONS
Contractor shall provide the services required to complete the project in accordance with
the attached Proposed Agreement submitted by Contractor and dated October 11, 1996.
2. CITY OBLIGATIONS
City shall provide appropriate direction and serve as a liaison to Contractor.
The work under this agreement will begin within ten (IO) days after receipt of notification
to proceed by City and be completed within 180 days of that date. Extensions of time may be
granted if requested by Contractor and agreed to in writing by the Community Services
Director. The Community Services Director will give allowance for documented and
substantiated unforeseeable and unavoidable delays not caused by a lack of foresight on the part
of Contractor, or delays caused by City inaction or other agencies' lack of timely action.
4.
3. PROGRESS AND COMPLETION
FEES TO BE PAID TO CONTRACTOR
The total fee payable for the services to be performed shall not exceed $24,430. No
other compensation for services will be allowed except those items covered by supplemental
agreements per Paragraph 8, "Changes in Work." City reserves the right to withhold a ten
percent (10%) retention until the project has been accepted by City.
Incremental payments, if applicable, should be made as outlined in attached Exhibit "A."
This agreement shall extend for a period of six months from date thereof. The
agreement may be extended by the Community Services Director for additional one month
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5. DURATION OF AGREEMENT
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periods or parts thereof, based upon a review of satisfactory performance and City's needs. The
parties shall prepare extensions in writing indicating effective date and length of the extended
agreement.
6. PAYMENT OF FEES
Payment of approved items on the invoice shall be mailed to the Contractor within 30
days of receipt of the invoice.
7. FINAL SUBMISSIONS
Within fifteen days of completion and approval of the project, Contractor shall deliver to
City all final documents, which shall be appropriately signed.
8. CHANGES IN WORK
If, in the course of the contract, changes seem merited by Contractor or City, and informal
consultations with the other party indicate that a change in the conditions of the agreement is
warranted, Contractor or City may request a change in agreement. Such changes shall be
processed by City in the following manner: A letter outlining the required changes shall be
forwarded to City by Contractor to inform them of the proposed changes along with a statement
of estimated changes in charges or time schedule. A Standard Amendment to Agreement shall
be prepared by City and approved by City according to the procedures described in Carlsbad
Municipal Code Section 3.28.172. Such Amendment to Agreement shall not render ineffective or
invalidate unaffected portions of the agreement.
9. COVENANTS AGAINST CONTINGENT FEES
Contractor warrants that their firm has not employed or retained any company or person,
other than a bona fide employee working for Contractor, to solicit or secure this agreement, and
that Contractor has not paid or agreed to pay any company or person, other than a bona fide
employee, any fee, commission, percentage, brokerage fee, gift, or any other consideration
contingent upon, or resulting from, the award or making of this agreement. For breach or
violation of this warranty, City shall have the right to annul this agreement without liability, or, in
its discretion, to deduct from the agreement price or consideration, or otherwise recover, the full
amount of such fee, commission, percentage, brokerage fees, gift, or contingent fee.
10. NONDISCRIMINATION CLAUSE
Contractor shall comply with the state and federal laws regarding nondiscrimination.
11. TERMINATION OF CONTRACT
In the event of Contractor's failure to prosecute, deliver, or perform the work as provided
for in this agreement, the City Manager may terminate this agreement for nonperformance by
notifying Contractor by certified mail of the termination of the Contractor. Contractor, thereupon,
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has five (5) working days to deliver said documents owned by the City and all work in progress to
the Community Services Director. The Community Services Director shall make a
determination of fact based upon the documents delivered to City of the percentage of work
which Contractor has performed which is usable and of worth to City in having the agreement
completed. Based upon that finding as reported to the City Manager, the Manager shall
determine the final payment of the agreement.
This agreement may be terminated by either party upon tendering thirty (30) days written
notice to the other party. In the event of such suspension or termination, upon request of City,
Contractor shall assemble the work product and put same in order for proper filing and closing
and deliver said product to City. In the event of termination, Contractor shall be paid for work
performed to the termination date; however, the total shall not exceed the lump sum fee payable
under paragraph 4. The City Manager shall make the final determination as to the portions of
tasks completed and the compensation to be made.
12. DISPUTES
If a dispute should arise regarding the performance of work under this agreement, the
following procedure shall be used to resolve any question of fact or interpretation not otherwise
settled by agreement between parties. Such questions, if they become identified as a part of a
dispute among persons operating under the provisions of this agreement, shall be reduced to
writing by the principal of Contractor or City Community Services Director. A copy of such
documented dispute shall be forwarded to both parties involved along with recommended
methods of resolution which would be of benefit to both parties. The City Community Services
Director or principal receiving the letter shall reply to the letter along with a recommended
method of resolution within ten (IO) days. If the resolution thus obtained is unsatisfactory to the
aggrieved party, a letter outlining the dispute shall be forwarded to the City Council for their
resolution through the Office of the City Manager. The City Council may then opt to consider the
directed solution to the problem. In such cases, the action of the City Council shall be binding
upon the parties involved, although nothing in this procedure shall prohibit the parties seeking
remedies available to them at law.
13. CLAIMS AND LAWSUITS
Contractor agrees that any contract claim submitted to City must be asserted as part of
the contract process as set forth in this agreement and not in anticipation of litigation or in
conjunction with litigation. Contractor acknowledges that if a false claim is submitted to City, it
may be considered fraud and Contractor may be subject to criminal prosecution. Contractor
acknowledges that California Government Code sections 12650 et seq., the False Claims Act,
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provides for civil penalties where a person knowingly submits a false claim to a public entity.
These provisions include false claims made with deliberate ignorance of the false information or
in reckless disregard of the truth or falsity of information. If the City of Carlsbad seeks to recover
penalties pursuant to the False Claims Act, it is entitled to recover its litigation costs, including
attorney's fees. Contractor acknowledges that the filing of a false claim may subject Contractor
to an administrative debarment proceeding wherein Contractor may be prevented to act as a
Contractor on any public work or improvement for a period of up to five years. Contractor
acknowledges debarment by another jurisdiction is grounds for the City of Carlsbad to disqualify
Contractor from the selection process. - (Initial)
The provisions of Carlsbad Municipal Code sections 3.32.025, 3.32.026, 3.32.027 and
3.32.028 pertaining to false claims are incorporated herein by reference. (Initial)
14. STATUS OF THE CONTRACTOR
Contractor shall perform the services provided for herein in Contractor's own way as an
independent contractor and in pursuit of Contractor's independent calling, and not as an
employee of City. Contractor shall be under control of City only as to the result to be
accomplished, but shall consult with City as provided for in the request for proposal. The
persons used by Contractor to provide services under this agreement shall not be considered
employees of City for any purposes whatsoever.
The Contractor is an independent contractor of City. The payment made to Contractor
pursuant to the agreement shall be the full and complete compensation to which Contractor is
entitled. City shall not make any federal or state tax withholdings on behalf of Contractor or
hidher employees or subcontractors. City shall not be required to pay any workers'
compensation insurance or unemployment contributions on behalf of Contractor or hidher
employees or subcontractors. Contractor agrees to indemnify City within 30 days for any tax,
retirement contribution, social security, overtime payment, unemployment payment or workers'
compensation payment which City may be required to make on behalf of Contractor or any
employee or subcontractor of Contractor for work done under this agreement or such
indemnification amount may be deducted by City from any balance owing to Contractor.
Contractor shall be aware of the requirements of the Immigration Reform and Control Act
of 1986 and shall comply with those requirements, including, but not limited to, verifying the
eligibility for employment of all agents, employees, subcontractors and consultants that are
included in this agreement.
15. CONFORMITY TO LEGAL REQUIREMENTS
Contractor shall cause all drawings and specifications to conform to all applicable
requirements of law: federal, state and local. Contractor shall provide all necessary supporting
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documents, to be filed with any agencies whose approval is necessary.
16. OWNERSHIP OF DOCUMENTS
City will provide copies of the approved plans to any other agencies.
All plans, studies, sketches, drawings, reports, and specifications as herein required are
the property of City, whether the work for which they are made be executed or not. In the even1
this agreement is terminated, all documents, plans, specifications, drawings, reports, and studies
shall be delivered forthwith to City. Contractor shall have the right to make one (1) copy of the
plans for hidher records.
17. REPRODUCTION RIGHTS
Contractor agrees that all copyrights which arise from creation of the work pursuant to
this contract shall be vested in City and hereby agrees to relinquish all claims to such copytights
in favor of City.
18. HOLD HARMLESS AGREEMENT
Contractor agrees to indemnify and hold harmless the City of Carlsbad and its officers,
officials, employees and volunteers from and against all claims, damages, losses and expenses
including attorney fees arising out of the performance of the work described herein caused in
whole or in part by any willful misconduct or negligent act or omission of Contractor, any
subcontractor, anyone directly or indirectly employed by any of them or anyone for whose acts
any of them may be liable, except where caused by the active negligence, sole negligence, or
willful misconduct of the City of Carlsbad.
Contractor shall at its own expense, upon written request by City, defend any such suit or
action brought against City, its officers, officials, employees and volunteers. Contractor's
indemnification of City shall not be limited by any prior or subsequent declaration by Contractor.
19. ASSIGNMENT OF CONTRACT
Contractor shall not assign this agreement or any part thereof or any monies due
thereunder without the prior written consent of City.
20. SUBCONTRACTING
If Contractor shall subcontract any of the work to be performed under this agreement by
Contractor, Contractor shall be fully responsible to City for the acts and omissions of Contractor's
subcontractor and of the persons either directly or indirectly employed by the subcontractor, as
Contractor is for the acts and omissions of persons directly employed by Contractor. Nothing
contained in this agreement shall create any contractual relationship between any subcontractor
of Contractor and City. Contractor shall bind every subcontractor and every subcontractor of a
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subcontractor by the terms of this agreement applicable to Contractor's work unless specifically
noted to the contrary in the subcontract in question approved in writing by City.
21. PROHIBITED INTEREST
No official of City who is authorized in such capacity on behalf of City to negotiate, make,
accept, or approve, or take part in negotiating, making, accepting, or approving of this
agreement, shall become directly or indirectly interested personally in this agreement or in any
part thereof. No officer or employee of City who is authorized in such capacity and on behalf of
City to exercise any executive, supervisory, or similar functions in connection with the
performance of this agreement shall become directly or indirectly interested personally in this
agreement or any part thereof.
22. VERBAL AGREEMENT OR CONVERSATION
No verbal agreement or conversation with any officer, agent, or employee of City, either
before, during or after the execution of this agreement, shall affect or modify any of the terms or
obligations herein contained nor entitle the Contractor to any additional payment whatsoever
under the terms of this agreement.
23. SUCCESSORS OR ASSIGNS
Subject to the provisions of Paragraph 18, "Hold Harmless Agreement," all terms,
conditions, and provisions hereof shall inure to and shall bind each of the parties hereto, and
each of their respective heirs, executors, administrators, successors, and assigns.
24. EFFECTIVE DATE
This agreement shall be effective on and from the day and year first written above.
City has determined, using the guidelines of the Political Reform Act and City's conflict of
interest code, that Contractor will not be required to file a conflict of interest statement as a
requirement of this agreement. However, Contractor hereby acknowledges that Contractor has
the legal responsibility for complying with the Political Reform Act and nothing in this agreement
releases Contractor from this responsibility.
26. INSURANCE
25. CONFLICT OF INTEREST
Contractor shall obtain and maintain for the duration of the agreement and any and all
amendments insurance against claims for injuries to persons or damage to property which may
arise out of or in connection with performance of the work hereunder by Contractor, his agents,
representatives, employees or subcontractors. Said insurance shall be obtained from an
insurance carrier admitted and authorized to do business in the State of California. The
insurance carrier is required to have a current Best's Key Rating of not less than "A-:V' and shall
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meet the City's policy for insurance as stated in Resolution No. 91-403.
A. Coverages and Limits,
Contractor shall maintain the types of coverages and minimum limits indicated
herein, unless a lower amount is approved by the City Attorney or City Manager:
1. Comprehensive General Liability Insurance. $1,000,000 combined single-
limit per occurrence for bodily injury, personal injury and property damage. If the submitted
policies contain aggregate limits, general aggregate limits shall apply separately to the work
under this contract or the general aggregate shall be twice the required per occurrence limit.
Automobile Liability (if the use of an automobile is involved for Contractor's
work for the City). $1,000,000 combined single-limit per accident for bodily injury and property
damage.
3. Workers' Compensation and Employer's Liability. Workers' Compensation
limits as required by the Labor Code of the State of California and Employer's Liability limits of
$1,000,000 per accident for bodily injury.
4. Professional Liability. Errors and omissions liability appropriate to the
contractor's profession with limits of not less than $1,000,000 per claim. Coverage shall be
maintained for a period of five years following the date of completion of the work.
2.
B. Additional Provisions
Contractor shall ensure that the policies of insurance required under this
1. City shall be named as an additional insured on all policies excluding
2. Contractor shall furnish certificates of insurance to City before
3. Contractor shall obtain occurrence coverage, excluding Professional
Liability which shall be written as claims-made coverage.
4. This insurance shall be in force during the life of the agreement and any
extension thereof and shall not be canceled without 30 days prior written notice to City sent by
certified mail.
If Contractor fails to maintain any of the insurance coverages required
herein, then City will have the option to declare Contractor in breach, or may purchase
replacement insurance or pay the premiums that are due on existing policies in order that the
required coverages may be maintained. Contractor is responsible for any payments made by
City to obtain or maintain such insurance and City may collect the same from Contractor or
deduct the amount paid from any sums due Contractor under this agreement.
agreement contain, or are endorsed to contain, the following provisions.
Workers' Compensation and Professional Liability.
commencement of work.
5.
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27. RESPONSIBLE PARTIES
The name of the persons who are authorized to give written notices or to receive written
notice on behalf of City and on behalf of Contractor in connection with the foregoing are as
follows:
For City: Title
Name
Address
For Contractor; Title
Name
Address
28. BUSINESS LICENSE
Contractor shall obtain and maintain a City of Carlsbad Business License for the duration
of the agreement.
29. ENTIRE AGREEMENT
This agreement, together with any other written document referred to or contemplated
herein, embody the entire agreement and understanding between the parties relating to the
subject matter hereof. Neither this agreement nor any provision hereof may be amended,
modified, waived or discharged except by an instrument in writing executed by the party against
which enforcement of such amendment, waiver or discharge is sought.
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Executed by Contractor this day of ,19
CONSULTANT:
HILTON FAFGNKOPF & HOBSON, UC ,
V
ATTEST:
Robert D. Hilton, Presid-ent a.LctL 74.a1* ALETHA L. RAUTENKRANZ City Clerk
January 20, 1997
DATE
1
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(print name/title)
(Proper notarial acknowledgment of execution by Contractor must be attached.)
(President or vice-president and secretary or assistant secretary must sign for corporations. If
only one officer signs, the corporation must attach a resolution certified by the secretary or
assistant secretary under corporate seal empowering that officer to bind the corporation.)
APPROVED AS TO FORM:
RONALD R. BALL
City Attorney / i’
BY &I+V y/ ’j ,L ’
DepuG City Attorney
/‘
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STATE OF CALIFORNIA COUNTY OF
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personally appeared
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(or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) i:
subscribed to the within instrument and acknowledged to me that helshelthey executed the 5
in hislheritheir authorized capacity(ies), and that by hisiherltheir signature(s) on the instrumer
person(s) or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature -& 7, 7%4
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(This area for official notarial seal)
Title of Document
Date of Document
Other signatures not acknowledged
No. of Pages
3008 (1
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COUNTY OF
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personally appeared
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(or proved to me on the basis of satisfactory,evidence) to be the person(s) whose nameis) is
subscribed to the within instrument and acknowledged to me that he/she/they executed the s'
in his/her/their authorized capacity(ies), and that by hislheritheir signature(s) on the instrumen
person(s) or the entity upon behalf of which the person(s) acted, executed the instrument.
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WITNESS my hand and official seal.
Signature
[This area for official notarial seal)
Title of Document
Date of Document
Other signatures not acknowledged
No. of Pages
3008 (1,:
First American Title lnsuran
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HILTON FARNKOPF & HOBSON a Advisory Services to - Municipal Management -
2201 Walnut Avenue, Suite 280 Fll
Fremont, California 94538-2334 Newport 1 Telephone: 5! 017 13-3270 Fax: 510/713-3294
October 11,1996
Mr. Jim Hagaman
City of Carlsbad
405 Oak Avenue
Carlsbad, California 92008
Administrative Services/Projects Manager --- - - --- -_________
Proposed Agreement to
Review Coast Waste Management's
Fiscal 1996 Revenue and Expenses
Dear Mr. Hagaman:
This proposed Agreement documents the background, objectives, approach, scope,
limitations, fees, and other terms and conditions of the consultkg services that
Hilton Farnkopf & Hobson (HF&H) will provide to the City of Carlsbad (City).
Background
The City arranges for refuse collection service for its residential, commercial, and
rolloff customers through an exclusive franchise agreement with Coast Waste
Management (CWM). The agreement grants the City the right to set the rates that
CWM charges its customers in the City.
The City has historically set rates intended to reimburse CWM for its reasonable ar
necessary operating costs plus a profit margin of 9%. In 1992, the City adopted a rat
index method (developed by HF&H) to periodically adjust refuse rates. The rate
index determined the portion of rates that were attributable to changes in CWM's
various costs (e.g., labor, equipment, disposal, etc.). At the time, the County of San
Diego (County) charged a disposal tipping fee of $23 per ton.
In the fall of 1994, due to several external political and economic factors, CWM anc
the City were faced with the prospect of paying $74 per ton for disposal at County
landfills. CWM then began transporting and disposing its waste outside the Count
landfill system, and the City used the rate index to set rates based on a disposal cost
of $55 per ton.
The City and CWM both expected that setting rates based on $55 per ton would
generate revenues for CWM that exceeded the company's operating costs and agree
upon profit. This was done to foster rate stability in an uncertain disposal
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Mr. Jim Hagaman
October 11,1996
Page 2
environment. The City and CWM intended to account for the excess revenues anc
set them aside for future uses such as mitigating rate increases or investing in new
disposal solutions.
Iln October 1995, the County lowered its tipping fee to $47.50 and CWM discontinuc
transporting its waste outside the County. Shortly thereafter, HF&H reviewed
CWM'S actual revenues and expenses in the City (based on CWM's unaudited
financial statements) and estimated that CWM's excess revenues were
approximately $548,000 for fiscal 1995. We also reviewed the company's projected
revenues and expenses for the fiscal 1996 and found that CWM's excess revenue wi
projected to be approximately $423,000.
In July 1996, the County committed to lowering its tipping fees to $40 per ton for fii
years, and the City reduced its refuse collection rates to a level that corresponded to
the County's new tipping fee, thereby ending the generation of excess revenues. TI
City also required that CWM prepare audited financial statements and submit then
to the City each year beginning with its financial statements for fiscal 1996.
Engagement Objectives
The City desires to quantify the actual excess revenue ahount resulting from its
policy of setting rates higher than CWM's cost of service during fiscal 1995 and 1996
The City has available to it several alternative uses for the excess revenues (e.g.,
capital improvements, stabilization of future rates, special projects, etc.) and needs
this information to best evaluate those alternatives.
Although the $548,000 surplus amount for fiscal 1995 was based on unaudited
financial statements, the City may not be in a position to determine a more reliable
estimate. CWM has stated that it is not able to retroactively provide audited
financial statements for fiscal 1995. Further, the cost of retroactively preparing
audited financial statements for that year and reviewing cost allocations based on
those statements may outweigh the potential increase or decrease in the surplus
amount that was calculated based on the unaudited financial statements.
recytlea (j paper
0 0 @ - - - HILToNFAIwKoPF&€ioBsoN
Mr. Jim Hagaman
October 11,1996
Page 3
However, CWM's actual revenue surplus for fiscal 1996 may differ materially frorr
its projected results. Therefore, the City's objective for this engagement is to:
determine the amount of revenue that exceeded CWM's reasonable operating costs
and allowed profit in the City based on its audited financial statements for fiscal
1996.
Approach
We intend to achieve this objective by reviewing a revenue and cost allocation
spreadsheet prepared by CWM. We propose that CWM allocate its audited revenuf
and expenses for fiscal 1996 between its operations inside and outside the City, and
among its customer classes (Le., residential, commercial, and rolloff). We will
evaluate the reasonableness of CWM's allocated costs, adjust them as appropriate,
and determine its revenue surplus for fiscal 1996.
Scope of Work
The scope of our work will be comprised of the tasks described below. We have
outlined the level of effort and cost associated with each task in Exhibit 1.
Task 1 - Initiate Proiect
It is our hope that we can initiate this project (Le., agree on the scope, terms, fees,
and schedule, etc.) at our meeting with City staff scheduled for Monday,
September 30,1996. We will not bill the City for our cost of attending that meeting
nor is it included in our proposed fees. However, we will bill the City at our
standard hourly rates described in Task 5 for any additional meetings not described
in our scope of work.
In addition to our meeting with the City, we will meet once with CWM to discuss
the objectives of the project and to outline the format and content of the revenue
and cost allocation spreadsheet that CWM will prepare. We will discuss the
timeframe within which CWM expects to complete the spreadsheet, and report the
results of our meeting to the City. We have included our cost of this meeting in OUJ
fee estimate.
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Mr. Jim Hagaman I
October 11,1996
Page 4
Task 2 - Review Revenue and Cost Allocation Spreadsheet
We will revie-w the spreadsheet for completeness, accuracy, and consistency with
our previous discussions with CWM. We will venfy CWM's reconciliation of the
spreadsheet to its audited financial statements for fiscal 1996.
We will compare CWM's actual revenue and expenses for fiscal 1996sbased on its
audited financial statements with its projected revenue and expenses for fiscal 1996
which were based on its unaudited financial statements for fiscal 1995. We will
obtain from CWM explanations and supporting documentation for any sigruficant
variances between its projected and actual results, and evaluate the reasonableness
of those variances.
We will analyze the reasonableness of CWM's revenue and cost allocations by
calculating certain financial and operational ratios. We will compare those ratios
between inside and outside the City as well as compare them with industry average
with which we are familiar. We will perform detailed testing of significant
operational statistics used to docate costs (i.e., routes, tons) to verify the reliability
of CWM's cost allocations. We will perform limited detailed testing of selected
major revenue and cost categories and those categories with signzficant variances tc
evaluate the reasonableness and necessity of CWM's reported revenue and
expenses. We will prepare workpapers documenting our review. Based on our
review and analysis, we will calculate the amount of revenue that exceeded CWM':
operating costs and allowed profit in the City. We will also recalculate the required
rate adjustments as of July 1,1996 and compare them to the actual rate adjustments
that were implemented by the City.
If we propose any adjustments to CWM's reported revenues and expenses, we will
review them with CWM prior to preparing our draft report.
Task 3 - Communicate Results
We will submit to the City and CWM a draft report accompanied by exhibits
describing our work and our findings. We will receive written comments regarding
the draft report, and prepare our final report. We will present our findings once to
City staff or to the City Council.
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0 e @ - - HILTONF*RNKOPF&H0BSON
Mr. Jim Hagaman
Odober 11,1996
Page 5
Task 4 - Proiect Manavement
We will administer the project, conduct internal quality reviews, and compile our
project work papers at the engagement’s conclusion.
Task 5 - SDecial Proiects
The City has requested us to provide hourly consulting rates for future tasks relatec
to solid waste that we may perform on an ad hoc basis. We will perform those task
as directed by the City for the hourly fees shown on the billing rate schedule shown
in Exhibit 2. We will obtain the City’s approval in writing prior to performing any
of these tasks.
Limitations
Our review will be substantially different in scope than an examination done in
accordance with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we will not express such an opinion.
Our review will entail only limited detailed testing of source documents, however,
CWM’s external auditors will perform extensive detailed testing of the company’s
source documents in preparing the audited financial statements.
Our review of the allocations of cost and revenue are intended for use by the City of
Carlsbad (which is in a position to understand the purpose of their preparation and
the limitations of their use) only and their use by any other person or for any other
purpose is not intended.
The scope of our work will be limited to reviewing CWs revenues and expenses
for fiscal 1996. We do not intend to review any projections of 1997 operating results.
staffing
I will be the Project Director for this engagement. David Davis will be the Project
Manager, and he may delegate certain tasks to qualified staff to minimize fees.
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0 e m e&€ HILTON FARNKOPF & HOBSON -
Mr. Jim Hagaman
October 11,1996
Page 6
Fees and Schedule
The estimated cost to perform Tasks 1 through 4 is $24,430 based on the tasks and
level of effort shown in the attached workplan shown in Exhibit I. Payment is due within 30 days of invoicing, and a late fee of 1% per month may be added to baIana
more than 30 days past due.
CWM's accounting finn has estimated it would complete draft audited financial
statements (which will be essentially complete except for CWM's accrued liability tc
the City for excess revenues) by early November 1996, and complete the cost
allocation spreadsheet by mid to late November. Assuming we receive the cost
allocation spreadsheet in late November, we expect to deliver our draft report by
January 10,1997. We will produce our final report within seven days of receiving
written comments from City staff regarding our draft report. This schedule is based
on receiving all necessary data from CWM in the format requested in a timely
manner. * * *
Thank you for the opportunity to offer our services to the City of Carlsbad. If the
terms and conditions of this proposal are acceptable to @e City, please execute this
Agreement by signing below and returning a copy to us. If you have any questions,
please call David Davis at 714/251-8628, or me at 510/713-3270.
Very truly yours, +4*
Robert D. Hilton, CMC
President
Attachments: Exhibit 1 - Project Workplan
Exhibit 2 - Billing Rate Schedule
I agree to the scope, terns, conditions, and fees of $24,430 as documented in the
above Agreement.
Approved by: , on this - day of , 1996. (signature)
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$$I=@ .. msrrruv~
RDH DILD SBP DM TOW Y
1.0 hitiaGe Project
1.1 ~eet wi& &e City to initiate project. 0 0 0
I
3.1 Prepare Chft exhibits and report. 3 24 IO 8 45
3.2 Prepare hd exhibits m.d report. 1 2 6 8 17
3.3 Present results to City staff or City Council. 4 4 8
Subtotal Task 3 Hours: 8 30 16 16 70
Subtotal Task 3 Fee: $1,560 $3,600 $1,440 $880 $7,480
4.8 Pmject Ahiniska~on
4.1 Prepae workpapers 6 6
4.2 Manage project 4 8 12
Subtotal Task 4 Hours: 4 a 6 0 18
Subtotal Task 4 Fees: $780 $960 $540 $0 $2,280
5~9 Special Pmje&
Subtotd Task 5 How: 0 0 0 0 0
Subtotal Task 5 Fees: $0 $0 $0 $0 $0
! TOtd Project Hours: 16 71 120 18 225
Hourly Rate: $195 $120 $90 $55 N/A
Total Professional Fees: $3,120 $8320 $10,800 $990 $23,430
$1,000 Out-of-Pocket Expenses
Total Fees & Expenses - $24,430
CWM's liability to the City).
3. Prepare cost allocation spreadsheet.
4. Perform detailed testing on cost
allocation spreadsheet and calculate
revenue surplus. Prepare draft report,
5. Frovide mitten comments on draft
report.
6. Prepare final report.
November 22,1996 GL&T+
January 10,1997 HF&H
7
January 24,1997 City
February 28,1997 I HF&H